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February 21, 2024
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Portland Office CRE Market Update 4TH Qtr 2023


This report provided by Kidder Mathews


Direct vacancy rates soared to a record high of 12.1%.
Asking rental rates fell QOQ to $28.56/SF FSG.
Sales transactions dropped to a 10-year low with approx. 20 sales in Q4.

Market Drivers

Vacancy and availability rates continue to rise across the Portland metro to record high numbers at year-end. Direct vacancy rates broke past 12% for the first time in 20 years.
Absorption continues to be in the red at the end of 2023, the 4th consecutive year to post negative absorption since the onset of the pandemic. However, in contrast to many other regions, Portland has a minimal development pipeline, helping to relieve anymore future
Transaction volume reached record lows for both leasing and sales on an annual basis, posting at 3 msf and 1.9 msf respectively. Smaller users have driven the bulk of space signings the past year, adapting to the hybrid work model. In terms of sales, investors and lenders are exercising caution given the economic uncertainty that has presented challenges this past year.

Economic Review
As of October 2023, the unemployment rate for the Portland-Vancouver-Hillsboro MSA was 3.3%, down from 4.2% at the same time last year. This is compared to 3.3% for the state of Oregon and 3.9% for the nation.
Although the battle with inflation and hiked interest rates continues, incomes in Portland exceed the national average, and population growth remains steady. Portland is popular among millennials looking for high quality of life and the lack of sales tax in Oregon is also an appeal.

Near Term Outlook

The current office environment is favorable to the tenant, and downward rate pressure, increasing concessions and TIs, and downtime to lease space are expected to continue into the new year.
The Portland office market, like many other metros across the nation, is still navigating through long-term post-pandemic woes, coupled with a recent downturn of the economy. As businesses head into the new year with economic uncertainty, it is anticipated that recovery may be slower than expected.

The information in this report was composed by the Kidder Mathews Research Group and prepared by Kidder Mathews Director of Research Gary Baragona. Data source: CoStar

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